PRMIA 8008 Exam III: Risk Management Frameworks . Operational Risk . Credit Risk . Counterparty Risk . Market Risk . ALM . FTP – 2015 Edition Online Training
PRMIA 8008 Online Training
The questions for 8008 were last updated at Nov 20,2024.
- Exam Code: 8008
- Exam Name: Exam III: Risk Management Frameworks . Operational Risk . Credit Risk . Counterparty Risk . Market Risk . ALM . FTP - 2015 Edition
- Certification Provider: PRMIA
- Latest update: Nov 20,2024
The probability of default of a security over a 1 year period is 3%.
What is the probability that it would have defaulted within 6 months?
- A . 98.49%
- B . 3.00%
- C . 1.51%
- D . 17.32%
Which of the following best describes economic capital?
- A . Economic capital is the amount of regulatory capital mandated for financial institutions in the OECD countries
- B . Economic capital is the amount of regulatory capital that minimizes the cost of capital for firm
- C . Economic capital reflects the amount of capital required to maintain a firm’s target credit rating
- D . Economic capital is a form of provision for market risk losses should adverse conditions arise
Which of the following will be a loss not covered by operational risk as defined under Basel II?
- A . Earthquakes
- B . Fat finger losses
- C . Systems failure
- D . Strategic planning
In respect of operational risk capital calculations, the Basel II accord recommends a confidence level and time horizon of:
- A . 99.9% confidence level over a 10 day time horizon
- B . 99% confidence level over a 10 year time horizon
- C . 99% confidence level over a 1 year time horizon
- D . 99.9% confidence level over a 1 year time horizon
Which of the following statements are true:
I. Stress testing, if exhaustive, can replace traditional risk management tools such as value-at-risk (VaR)
II. Stress tests can be particularly useful in identifying risks with new products
III. Stress testing is distinct from a bank’s ICAAP carried out periodically
IV. Stress testing is a powerful communication tool that can convey risks to decisionmakers in an organization
- A . I, II and III
- B . I and III
- C . II and IV
- D . All of the above
CORRECT TEXT
The standard error of a Monte Carlo simulation is:
- A . Zero
- B . The same as that for a lognormal distribution
- C . Proportional to the inverse of the square root of the sample size
- D . None of the above
Which of the following is not a consideration in determining the liquidity needs of a firm (as opposed to determining the time horizon for liquidity risk)?
- A . Speed with which new equity can be issued to the owners
- B . Collateral
- C . Off balance sheet items
- D . The firm’s business model
Changes in which of the following do not affect the expected default frequencies (EDF) under the KMV Moody’s approach to credit risk?
- A . Changes in the debt level
- B . Changes in the risk free rate
- C . Changes in asset volatility
- D . Changes in the firm’s market capitalization
Which of the following is NOT an approach used to allocate economic capital to underlying business units:
- A . Stand alone economic capital contributions
- B . Marginal economic capital contributions
- C . Fixed ratio economic capital contributions
- D . Incremental economic capital contributions
Which of the following is closest to the description of a ‘risk functional’?
- A . A risk functional is the distribution that models the severity of a risk
- B . A risk functional is a model distribution that is an approximation of the true loss distribution of a risk
- C . Risk functional refers to the Kolmogorov-Smirnov distance
- D . A risk functional assigns a penalty value for the difference between a model distribution and a risk’s severity distribution
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